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Arena, Eisai Modify Marketing & Supply Agreement for Belviq

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Arena Pharmaceuticals, Inc. announced that it has amended the marketing and supply agreement with Eisai Co., Ltd. for Belviq. Eisai will gain global commercialization rights to Belviq including the territories retained by Arena under the companies’ previous agreement, with control over development and commercialization decisions globally. It will also take care of all expenses related to development of Belviq.
Arena’s shares were up 7.33% on Jan 4 during after hours trading session.

Arena’s share price has declined 14.2% in the past one year compared with Zacks classified Medical-Biomedical and Genetics industry’s fall of 22.0%.

Per the revised agreement, Arena will transfer some intellectual property, assets and records related to Belviq to Eisai.  It will also provide technology transfer to Eisai for the option to manufacture Belviq. Meanwhile, Arena will continue to manufacture Belviq at its facility in Switzerland and will sell finished product to Eisai for marketing and distribution.  In addition, the comapny will give its rights to Eisai under the agreements with Ildong Pharmaceutical Co. Ltd.., Abic Marketing Limited and CY Biotech Company Limited.

Eisai, on the other hand, will be responsible for all further development, sales and marketing, regulatory and patent expenses.

Also, per the amended agreement, Arena is entitled to receive about $23 million over a two-year period for inventory and toward its manufacturing contributions, along with payments comparable to a contract manufacturer for continuing to supply Belviq. In addition, the company will be eligible to receive royalty payments of 9.5% on annual global net sales of Belviq, less than or equal to $175 million, 13.5% on annual global net sales greater than $175 million but less than or equal to $500 million and 18.5% on annual global net sales greater than $500 million. The company will also get $26 million in sales and regulatory milestones, which will include $25 million upon global net sales reaching $250 million in any 12-month period and $1 million for approval in Brazil.

Arena will no longer incur clinical development expenses related to Belviq, which could have crossed $80 million over the next several years. The company will participate in the upside potential of Belviq and studies such as the ongoing cardiovascular outcomes study, CAMELLIA.

We remind investors that Arena and Eisai had struck up a partnership in Jul 2010, under which the latter gained exclusive commercialization rights for Belviq solely in the U.S. The agreement was amended twice to expand Eisai’s exclusive commercialization rights to all countries in the world, excluding South Korea, Taiwan, Australia, New Zealand and Israel.

Zacks Rank & Key Picks

Arena currently carries a Zacks Rank #2 (Buy). Other favorably placed stocks in the health care sector include Cambrex Corporation and Anika Therapeutics Inc. (ANIK - Free Report) . While Cambrex sports a Zacks Rank #1 (Strong Buy), Anika carries a Zacks Rank#2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cambrex posted a positive earnings surprise in three of the four trailing quarters, with an average beat of 19.78%. Its share price was up 26.7% in the past one year.

Anika’s earnings estimates for 2016 and 2017 were up 3.9% and 0.5% respectively for the last 60 days. The company recorded a positive earnings surprise in each of the last four quarters, the average being 33.14%. Its share price was up 35.8% in the past one year.

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